Economics - Research Publications

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Start date: 2000 × End date: 2009 × Author: CREEDY, JOHN × Author: Kalb, Guyonne × Subject: maximum likelihood estimation ×

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    Discrete hours labour supply modelling: specification, estimation and simulation
    Creedy, J. ; Kalb, G. R. ( 2005-03)
    The assumption behind discrete hours labour supply modellingis that utility-maximising individuals choose from a relatively smallnumber of hours levels, rather than being able to vary hours workedcontinuously. Such models are becoming widely used in view of theirsubstantial advantages, compared with a continuous hours approach,when estimating and their role in tax policy microsimulation. Thispaper provides an introduction to the basic analytics of discrete hourslabour supply modelling. Special attention is given to model specification,maximum likelihood estimation and microsimulation of taxreforms. The analysis is at each stage illustrated by the use of numericalexamples. At the end, an empirical example of a hypotheticalpolicy change to the social security system is given to illustrate the roleof discrete hours microsimulation in the analysis of tax and transferpolicy changes.